The elite funds run by legendary investors such as Dan Loeb and David Tepper make hundreds of millions of dollars for themselves and their investors by spending enormous resources doing research on small cap stocks that big investment banks don’t follow. Because of their pay structures, they have strong incentive to do the research necessary to beat the market. That’s why we pay close attention to what they think in small cap stocks. In this article, we take a closer look at Dine Brands Global, Inc. (NYSE:DIN) from the perspective of those elite funds.
Dine Brands Global, Inc. (NYSE:DIN) investors should pay attention to an increase in enthusiasm from smart money of late. DIN was in 19 hedge funds’ portfolios at the end of September. There were 13 hedge funds in our database with DIN positions at the end of the previous quarter. Our calculations also showed that din isn’t among the 30 most popular stocks among hedge funds.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the market by 18 percentage points since May 2014 through December 3, 2018 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.
We’re going to check out the latest hedge fund action regarding Dine Brands Global, Inc. (NYSE:DIN).
What does the smart money think about Dine Brands Global, Inc. (NYSE:DIN)?
Heading into the fourth quarter of 2018, a total of 19 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 46% from the previous quarter. On the other hand, there were a total of 17 hedge funds with a bullish position in DIN at the beginning of this year. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, MSD Capital was the largest shareholder of Dine Brands Global, Inc. (NYSE:DIN), with a stake worth $60.2 million reported as of the end of September. Trailing MSD Capital was Ancora Advisors, which amassed a stake valued at $14.4 million. Millennium Management, Renaissance Technologies, and Waratah Capital Advisors were also very fond of the stock, giving the stock large weights in their portfolios.
As one would reasonably expect, some big names were breaking ground themselves. Waratah Capital Advisors, managed by Brad Dunkley and Blair Levinsky, initiated the most valuable position in Dine Brands Global, Inc. (NYSE:DIN). Waratah Capital Advisors had $7 million invested in the company at the end of the quarter. Bradley LouisáRadoff’s Fondren Management also initiated a $0.8 million position during the quarter. The following funds were also among the new DIN investors: Paul Tudor Jones’s Tudor Investment Corp, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, and Philippe Laffont’s Coatue Management.
Let’s check out hedge fund activity in other stocks similar to Dine Brands Global, Inc. (NYSE:DIN). These stocks are Diplomat Pharmacy Inc (NYSE:DPLO), Hostess Brands, Inc. (NASDAQ:TWNK), National Storage Affiliates Trust (NYSE:NSA), and Suburban Propane Partners LP (NYSE:SPH). This group of stocks’ market valuations are closest to DIN’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| DPLO | 13 | 64043 | 0 |
| TWNK | 24 | 91767 | 4 |
| NSA | 17 | 72715 | 8 |
| SPH | 4 | 86291 | -1 |
| Average | 14.5 | 78704 | 2.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 14.5 hedge funds with bullish positions and the average amount invested in these stocks was $79 million. That figure was $113 million in DIN’s case. Hostess Brands, Inc. (NASDAQ:TWNK) is the most popular stock in this table. On the other hand Suburban Propane Partners LP (NYSE:SPH) is the least popular one with only 4 bullish hedge fund positions. Dine Brands Global, Inc. (NYSE:DIN) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard TWNK might be a better candidate to consider a long position.
Disclosure: None. This article was originally published at Insider Monkey.
